nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2012‒09‒09
ten papers chosen by
Tommaso Reggiani
University of Cologne

  1. Employability-miles and worker employability awareness By Gerards Ruud; Grip Andries de; Witlox Maaike
  2. Risks and Returns to Educational Fields: A Financial Asset Approach to Vocational and Academic Education By Daniela Glocker; Johanna Storck
  3. The Allocation of a Prize (Expanded) By Pradeep Dubey; Siddhartha Sah
  4. Promoting Cooperation: the Distribution of Reward and Punishment Power By Daniele Nosenzo; Martin Sefton
  5. Discretionary Sanctions and Reward in the Repeated Inspection Game By Daniele Nosenzo; Theo Offerman; Martin Sefton; Ailko van der Veen
  6. Revisiting wage, earnings, and hours profiles By Rupert, Peter; Zanella, Giulio
  7. Promotion policy, wage and firm size By Zax, Ori
  8. Truthful Reporting, Moral Hazard and Purely Soft Information By Alessandro De Chiara; Luca Livio
  9. The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees By Fossen, Frank M.; Büttner, Tobias J. M.
  10. Employee referral, social proximity and worker discipline By Dhillon, Amrita; Iversen, Vegard; Torsvik, Gaute

  1. By: Gerards Ruud; Grip Andries de; Witlox Maaike (ROA rm)
    Abstract: This article studies the use and impact of a firm-sponsored training (“Employabilitymiles”)voucher scheme that aims to stimulate employees to develop a more activeattitude toward their own employability. Using data from two surveys of the firm’sworkforce, we find that voucher use is related to various personality traits and personalcharacteristics. In particular, a worker’s ambition, goal setting, and education level arepositively related to voucher use. In addition, women and those with longer tenure spendtheir vouchers more often. Conversely, workers with a more positive self-image as wellas those who are negatively reciprocal spend their vouchers less often. The negativerelation between voucher use and negative reciprocity suggests that workers whoare more negatively reciprocal perceive the voucher as a threat. Further, we find thatvoucher use positively affects worker employability awareness and willingness to train.Remarkably, participation in non-voucher training shows little relation to personalitytraits. From a human resources perspective, this finding suggests that by employing avoucher scheme, the firm makes training participation more dependent on employeepersonality and individual characteristics instead of human resources practices.
    Keywords: education, training and the labour market;
    Date: 2012
  2. By: Daniela Glocker; Johanna Storck
    Abstract: Applying a financial assets approach, we analyze the returns and earnings risk of investments into different types of human capital. Even though the returns from investing in human capital are extensively studied, little is known about the properties of the returns to different types of human capital within a given educational path. Using information from the German Micro Census, we estimate the risk and returns to around 70 fields of education and differentiate between vocational and academic education. We identify fields of education that are efficient investment goods, i.e. high returns at a given level of risk, and fields that are chosen for other (non-monetary) reasons. Furthermore, we rank fields of education by their return per unit of risk and find that university education is not always superior to other educational paths.
    Keywords: Educational choice, human capital investment, returns to schooling, mean-variance analysis
    JEL: I21 J24
    Date: 2012
  3. By: Pradeep Dubey (Department of Economics, Stony Brook University); Siddhartha Sah (Department of Mathematics, Rutgers University, New Brunswick, New Jersey)
    Abstract: Consider agents who undertake costly effort to produce stochastic outputs observable by a principal. The principal can award a prize deterministically to the agent with the highest output, or to all of them with probabilities that are proportional to their outputs. We show that, if there is sufficient diversity in agents' skills relative to the noise on output, then the proportional prize will, in a precise sense, elicit more output on average, than the deterministic prize. Indeed, assuming agents know each others?skills (the complete information case), this result holds when any Nash equilibrium selection, under the proportional prize, is compared with any individually rational selection under the deterministic prize. When there is incomplete information, the result is still true but now we must restrict to Nash selections for both prizes. We also compute the optimal scheme, from among a natural class of probabilistic schemes, for awarding the prize; namely that which elicits maximal effort from the agents for the least prize. In general the optimal scheme is a monotonic step function which lies ?between?the proportional and deterministic schemes. When the competition is over small fractional increments, as happens in the presence of strong contestants whose base levels of production are high, the optimal scheme awards the prize according to the "log of the odds", with odds based upon the proportional prize.
    JEL: C70 C72 C79 D44 D63 D82
    Date: 2012–03
  4. By: Daniele Nosenzo (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: Recent work in experimental economics on the effectiveness of rewards and punishments for promoting cooperation mainly examines decentralized incentive systems where all group members can reward and/or punish one another. Many self-organizing groups and societies, however, concentrate the power to reward or punish in the hands of a subset of group members (‘central monitors’). We review the literature on the relative merits of punishment and rewards when the distribution of incentive power is diffused across group members, as in most of the extant literature, and compare this with more recent work and new evidence showing how concentrating reward/punishment power in one group member affects cooperation.
    Keywords: rewards,punishment, discretionary incentives, decentralized incentives, peer-to-peer incentives, centralized incentives, experiment
    Date: 2012–08
  5. By: Daniele Nosenzo (School of Economics, University of Nottingham); Theo Offerman (CREED, Department of Economics, University of Amsterdam); Martin Sefton (School of Economics, University of Nottingham); Ailko van der Veen (CBESS, School of Economics, University of East Anglia)
    Abstract: We experimentally investigate a repeated “inspection game” where, in the stage game, an employee can either work or shirk and an employer simultaneously chooses to inspect or not inspect. Combined payoffs are maximized when the employee works and the employer does not inspect. However, the unique equilibrium of the stage game is in mixed strategies with positive probabilities of shirking/inspecting. We examine the effects of allowing the employer to sanction or reward the employee after she has inspected the employee. We find that rewards or sanctions can both discourage shirking, and have similar effects on joint earnings. In games allowing sanctions a reduction in shirking is accomplished with a lower inspection rate and the efficiency gains accrue to employers. In games allowing rewards employers actively reward employees for working and the efficiency gains are shared more equitably. A treatment where employers can combine sanctions and rewards leads to efficiencies similar to the single-instrument treatments, and outcomes more closely resemble those of the reward treatment in that the efficiency gains are shared.
    Keywords: inspection game, costly monitoring, discretionary incentives, rewards, punishment, experiment
    Date: 2012–10
  6. By: Rupert, Peter; Zanella, Giulio
    Abstract: We document empirical life cycle profiles of wages, earnings, and hours of work for pay from the Panel Study of Income Dynamics, following the same workers for up to four decades along the intensive margin of labor supply. For six of the eight cohorts we analyze the wage profile does not decline with age, while the earnings profile always does. The discrepancy is explained by a sharp drop of the hours profile beginning shortly after age 50, when many workers start a smooth transition into retirement by working progressively fewer hours. This pattern is not an artifact of staggered abrupt retirement, and is robust to attrition- and selection correction (i.e., to taking into account that the composition of our sample, for a given cohort, changes over time). We explore the nontrivial restrictions on dynamic models of the aggregate economy that this evidence suggests, and we provide numerical profiles that can be readily used in quantitative macroeconomic analysis.
    Keywords: Economics, General, Economics, Other, International Economics, life cycle, wage profile, labor supply, intensive margin human capital, preretirement
    Date: 2012–08–29
  7. By: Zax, Ori
    Abstract: In contrast to the predictions of conventional economic theory, it is well documented that similar workers receive wages positively correlated with the size of the firm employing them. To explain these findings the author augments the Waldman framework (Job Assignments, Signaling, and Efficiency, 1984) by adding a size variable and construct a dynamic model of promotion and workers' transitions where the firms' competition over workers is via the promotion policy and the wage levels. In equilibrium, managers in larger firms are on average better, thus commanding and receiving a higher wage than their counterparts in smaller firms, while the laborers of the larger firms receive higher wages to compensate them for the lower promotion rates in such firms. Hence the wage-size correlation is shown to be consistent with conventional economic theory in a large class of plausible environments. --
    Keywords: Firm size and wages,promotion decisions,hierarchies
    JEL: J30 J31 M51
    Date: 2012
  8. By: Alessandro De Chiara; Luca Livio
    Abstract: We examine a hierarchical model where a principal hires a risk averse supervisor to monitor the e ort exerted by a productive agent. We assume that the supervisor can misreport the collected evidence without incurring any cost. We develop a corruption-proof contract which makes it sequentially rational for the supervisor to report truthfully. Crucial features of our contract are the timing at which the report is sent and the supervisor's payment scheme. In particular, the report must be sent before the outcome observation and the principal must reward the supervisor if and only if her report maximizes the conditional probability of the realized outcome. We also highlight a non-trivial interplay between corruption incentives, the signal precision and the supervisor's risk aversion.
    Keywords: corruption; moral hazard; soft information; supervision; truthful reporting
    Date: 2012–08
  9. By: Fossen, Frank M.; Büttner, Tobias J. M.
    Abstract: We assess the relevance of formal education for the productivity of the self-employed and distinguish between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups because of different levels of control. We use the German Socio-economic Panel and account for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees' rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs. --
    Keywords: returns to education,opportunity,necessity,entrepreneurship
    JEL: J23 J24 J31 I20 L26
    Date: 2012
  10. By: Dhillon, Amrita (University of Warwick); Iversen, Vegard (University of Manchester); Torsvik, Gaute (University of Bergen)
    Abstract: We study ex-post hiring risks in low income countries with limited legal and regulatory frameworks. In our theory of employee referral, the new re- cruit internalises the rewards and punishments of the in-house referee meted out by the hiring firm. This social mechanism makes it cheaper for the rm to induce worker discipline. The degree of internalization depends on the un- observed strength of the endogenous social tie between the referee and the recruit. When the referee's utility is increasing in the strength of ties, referee workplace incentives do not matter and referee and employer incentives are aligned, in this case industries and jobs with high costs of opportunism and where dense kinship networks can match the skill requirements of employers will have clusters of close family and friends, they will show a high incidence of referrals rather than anonymous hiring and will show a wage premium to referred workers matched by their higher productivity. This no longer applies if the referee's utility is decreasing in the strength of ties: referrals are then more costly for firms, they will be used less frequently by employers and will require higher referee wages (or status). We illustrate how these insights add to our understanding of South-Asian labour markets.
    Keywords: Efficiency wage Contracts, Moral hazard, Referee incentives, Referrals, Networks, Strength of ties, Spot market
    Date: 2012

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